Directors’ report

FOR THE YEAR ENDED 30 JUNE 2015

NATURE OF BUSINESS

Assore Limited was incorporated in South Africa in 1950 and is a mining holding company engaged principally in ventures involving base minerals and metals. The company’s shares are listed on the JSE Limited (the JSE) under “Assore” in the general mining sector and its ultimate holding company is Oresteel Investments Proprietary Limited. Assore’s principal investment is a 50% (2014: 50%) interest in Assmang Proprietary Limited (Assmang), which it controls jointly with African Rainbow Minerals Limited (ARM), which is also listed on the JSE. Assmang mines iron, manganese and chrome ores, and produces manganese alloys. In addition, the group mines Wonderstone (a type of pyrophyllite), a portion of which is beneficiated to produce high-precision components, and wear and acid-resistant tiles, which are installed in various mining, industrial and filtration applications. The group, through its wholly owned subsidiary, Ore & Metal Company Limited, is responsible for marketing all products produced by its joint venture and subsidiary companies, the bulk of which is exported and the remainder either used in the group’s beneficiation processes or sold locally. Details of the group’s activities are set out, by activity, in the operational review and commentary (refer here).

FINANCIAL RESULTS

The consolidated financial results for the year ended 30 June 2015 are summarised below:

Year ended 30 June
2015  2014
R’000  R’000
Turnover 2 526 096 1 768 561
(Loss)/profit before joint-venture entity and associate (25 501) 457 567
Share of profit from joint-venture entity, after taxation 1 317 138 3 572 155
Share of loss of associate, after taxation (1 197)
Profit for the year 1 290 440 4 029 722
Attributable to:
Shareholders of the holding company 1 403 371 4 005 123
Non-controlling shareholders (112 931) 24 599
As above 1 290 440 4 029 722
Profit attributable to the shareholders of the holding company (as above) 1 403 371 4 005 123
Dividends relating to the group’s activities for the year under review (refer note 26 to the consolidated financial statements) (619 242) (1 032 071)
Interim dividend No 116 of 300 cents (2014: 450 cents) per share – declared on 10 February 2015 418 821 628 232
Final dividend No 117 of 300 cents (2014: 550 cents) per share – declared on 26 August 2015 418 821 767 839
Less: Dividends attributable to treasury shares (218 400) (364 000)
Profit relating to year after dividends, net of dividends retained in the group on treasury shares 784 129 2 973 052
The attributable interest of the group in the aggregate net profit and losses after taxation of subsidiary companies was as follows:
Subsidiary companies
– Profits 401 219 543 674
– Losses (426 720) (86 107)

 

CONTROL OVER FINANCIAL REPORTING

The directors of the company are responsible for the preparation and fair presentation of the financial statements and related financial information included in this report. The independent external auditors, Ernst & Young Inc., whose report is set here, are responsible for expressing an opinion on the financial statements based on their audit.

The financial statements included in this report are based on judgements and estimates which are intended to be both reasonable and prudent and have been prepared by management in accordance with International Financial Reporting Standards (IFRS). The accounting policies are consistent with those of the previous year.

The financial statements have been prepared on the going concern basis and the directors have no reason to believe that the group will not be a going concern in the year ahead. With regard to the valuation of assets, the directors are of the opinion that the carrying amount of all assets included in the statement of financial position are appropriately valued.

In order to discharge their responsibilities with regard to the financial statements, the directors ensure, through the group’s appointed Audit and Risk Committee, that management maintains adequate accounting records and systems of internal control which are developed and reviewed for effectiveness on an ongoing basis. The systems of internal control are established organisational structures, policies and procedures, including budgeting and forecasting disciplines and are managed and controlled by suitably trained personnel who are organised in structures with appropriate segregation of authorities and duties. While internal controls are intended to adequately safeguard the group’s assets and prevent and detect material misstatement and loss, these systems can only be expected to provide reasonable, and not absolute, assurance as to the reliability of the financial information included in this report. The internal financial controls were assessed by the group’s outsourced internal audit function and were found to be satisfactory.

JOINT-VENTURE ENTITY

Assore holds a 50% interest in Assmang, which it controls jointly with ARM in terms of a long-standing shareholders’ agreement. In accordance with IFRS, Assmang is accounted for on the equity accounting basis, and Assore has disclosed its share of Assmang’s profit as “share of profit from joint-venture entity, after taxation”. Set out below are the financial statements of Assmang in abridged format, which combine its continuing and discontinued operations. The “Assets held for distribution” in Assmang refers to the sale of Dwarsrivier (refer “Acquisition of remaining 50% of Dwarsrivier” on the following page).

ABRIDGED CONSOLIDATED INCOME STATEMENT OF ASSMANG

Year ended 30 June
2015  2014
R’000  R’000
Turnover 21 121 497 27 561 503
Profit before taxation 3 703 280 9 892 013
Taxation 1 044 057 2 722 755
Earnings 2 659 223  7 169 258
Dividends declared during the year 3 000 000 3 500 000
(Loss)/profit for the year after dividends paid (340 777) 3 669 258

ABRIDGED CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF ASSMANG

At 30 June
2015 2014*
R’000 R’000
Assets
Non-current assets 23 725 390 23 082 111
Current assets        
Inventories 4 448 860 4 426 867
Trade and other receivables 3 532 558 4 822 595
Financial assets 85 017 112 130
Deferred tax asset 2 821
Assets held for distribution 1 103 246
Cash and cash equivalents 5 425 101 5 975 535
Total assets 38 322 993 38 419 238
Equity and liabilities
Equity 28 929 696 29 270 473
Non-current liabilities        
Deferred taxation liability 5 035 202 5 072 666
Long-term provisions 959 828 913 143
Current liabilities        
Trade and other payables 1 950 126 2 231 893
Short-term provisions 608 367 585 290
Taxation 369 778 345 773
Liabilities directly associated with the assets held for distribution 469 996
Total liabilities 9 393 297 9 148 765
Total equity and liabilities 38 322 993 38 419 238
Capital expenditure 3 836 808 3 643 143
Capital commitments 5 035 856 7 644 668
*Comparative figures have been restated in order to be consistent with the level of detail disclosed in the current year.

 

ACQUISITION OF REMAINING 50% OF DWARSRIVIER

On 24 June 2015, the company announced the acquisition from ARM of its 50% indirect share of Dwarsrivier Chrome Mine (Dwarsrivier) (held in Assmang) for a consideration of R450 million. The completion of the transaction is subject to certain conditions precedent, the most significant of which is the consent required, in terms of the Mineral Resources and Petroleum Development Act, by the Department of Mineral Resources (DMR) for the transfer of the mining right from Assmang that will operate Dwarsrivier (the Section 11 transfer). The purchase consideration has been disclosed in the consolidated statement of financial position as “Restricted cash” and will be adjusted for capital expenditure net of financial results from the operation in the intervening period until the Section 11 transfer is achieved. Once consent is granted, Assore will own 100% of Dwarsrivier, retrospective to 1 July 2014. Refer notes 8 and 32 to the consolidated financial statements for more detail.

ACQUISITION OF MINORITY STAKE IN IRONRIDGE

On 2 December 2014, the company announced that it had subscribed for a 30,3% stake in IronRidge Resources Limited (IronRidge), against which it was awarded a stake of 29,9% on 12 February 2015 for UK pounds 6,98 million (R121 953 000). The major focus of IronRidge is prospecting for iron ore deposits in Gabon. Refer note 5 to the consolidated financial statements for more detail. The investment is accounted for using the equity accounting method, since the group has significant influence in its operations.

DIRECTORS’ EMOLUMENTS

Other
Directors’ Contributions fringe
fees Bonuses to pension benefits
(refer note 1) Salaries (refer note 2) scheme (refer note 3) Total
R’000 R’000 R’000 R’000 R’000 R’000
2015
Executive 110 4 264 355 274 5 003
Desmond Sacco (Chairman)
CJ Cory (Chief Executive Officer) 96 4 950 14 225 1 249 368 20 888
AD Stalker (Group Marketing Director) 96 2 615 9 703 650 308 13 372
BH van Aswegen (Group Technical and Operations Director) 96 2 522 9 643 636 354 13 251
Non-executive
EM Southey (Deputy chairman and lead independent director) 535 535
RJ Carpenter (resigned 15 June 2015) 205 205
TN Mgoduso (appointed 2 February 2015) 104 104
S Mhlarhi 295 295
IN Mkhari (appointed 2 February 2015) 104 104
WF Urmson 455 455
Alternate
PE Sacco 36 1 862 7 213 470 267 9 848
2 132 16 213 41 139 3 005 1 571 64 060
2014
Executive
Desmond Sacco (Chairman) 110 4 264 355 256 4 985
CJ Cory (Chief Executive Officer) 96 4 583 15 261 1 177 453 21 570
AD Stalker (Group Marketing Director) 96 2 422 9 833 622 274 13 247
BH van Aswegen (Group Technical and Operations Director) 96 2 336 9 768 600 334 13 134
Non-executive
EM Southey (Deputy Chairman and lead independent director) 420 420
RJ Carpenter 180 180
S Mhlarhi 240 240
WF Urmson 360 360
Alternate
PE Sacco 36 1 693 7 270 435 253 9 687
1 634 15 298 42 487 2 834 1 570 63 823
Notes
1. Directors’ fees for executives include fees received from Assmang.
2. Due to the shareholding structure the company is unable to offer directors remuneration by way of share incentive or option arrangements, and bonuses are determined based on the group’s results for the year and the achievement of its long-term objectives. Directors owning shares in the group do so in their own right and disclosure thereof is made in the Directors’ report.
3. Other fringe benefits include medical aid contributions, car scheme allowances, life insurance contributions, group life contributions, leave paid out, study loan benefits, use of assets and unemployment insurance fund contributions.
For more detail relating to the group’s remuneration policy and structure, refer “Remuneration”.

 

DIRECTORS’ INTERESTS IN SHARES OF THE COMPANY

Interest of the directors in the ordinary shares of the company at 30 June 2015 were as follows:

Direct Indirect Direct Indirect
beneficial beneficial beneficial beneficial
number of number of number of number of
shares shares shares shares
2015 2015 2014 2014
Executive directors
Desmond Sacco 960 000 32 430 489 883 380 32 430 490
CJ Cory 50 000 50 000
AD Stalker
BH van Aswegen 4 505 4 505
Non-executive directors
EM Southey
RJ Carpenter (resigned 15 June 2015) 5 000 5 000
TN Mgoduso (appointed 2 February 2015)
S Mhlarhi
IN Mkhari (appointed 2 February 2015)
WF Urmson
Alternate director
PE Sacco 227 580 217 380
1 247 085 32 430 489 1 160 265 32 430 490

 

DIRECTORATE AND SECRETARY

The names of the directors, at the date of this report, and details of the company secretary, including its business and postal addresses, are set out on the inside back cover of this report.

Subsequent to the date of the previous annual report and up to the date of this report the following changes were made to the Assore board:

  • 2 February 2015 – Ms Thandeka Nozipho Mgoduso and Mrs Ipeleng Nonkululeko Mkhari were appointed as independent non-executive directors and Ms Mgoduso was appointed as a member of the Social and Ethics Committee on 1 October 2015.
  • 15 June 2015 – Mr RJ Carpenter resigned from the board as a non-executive director.

In terms of the Memorandum of Incorporation (MoI), Messrs EM Southey and WF Urmson are required to retire by rotation at the forthcoming Annual General Meeting (AGM). Messrs TN Mgoduso and IN Mkhari were appointed subsequent to the previous AGM and in terms of section 68(3) of the Companies Act are required to be reappointed at the next AGM. All of the aforementioned directors, being eligible, offer themselves for re-election and a brief curriculum vitae for each of these directors is included in the notice of the AGM (refer here).

DIVIDENDS

2015  2014
R’000  R’000
Dividends declared during the year
Final dividend No 115 of 550 cents (2014: 350 cents) per share – declared 3 September 2014 767 839 488 624
Interim dividend No 116 of 300 cents (2014: 550 cents) per share – declared on 10 February 2015 418 821 628 232
Less: Dividends attributable to treasury shares (309 400) (291 200)
877 260 825 656
Dividends relating to results of the group for the year under review
Interim dividend No 116 of 300 cents (2014: 450 cents) per share – declared on 10 February 2015 418 821 628 232
Final dividend No 117 of 300 cents (2014: 550 cents) per share – declared on 26 August 2015 418 821 767 839
Less: Dividends attributable to treasury shares (218 400) (364 000)
619 242 1 032 071

 

ANALYSIS OF SHAREHOLDING

The following analysis of shareholders, in accordance with the JSE Listings Requirements, has been established, based on an examination of the company’s share register at 30 June 2015. The directors are not aware of any material changes to this analysis between the year-end and the date of this report.

2015 2014
Number Number
of shares % of shares %
Shareholder spread
Shares held by the public/non-public
Non-public*
– Holders in excess of 10% of the share capital 105 021 450 75,23 105 021 450 75,23
– Directors of the company (direct and beneficial) 1 247 085 0,89 1 160 265 0,83
106 268 535 76,12 106 181 715 76,06
Public shareholders 33 338 465 23,88 33 425 285 23,94
139 607 000 100,00 139 607 000 100,00
* As defined by Rule 4.25 of the JSE Listings Requirements
Major shareholders
Oresteel Investments Proprietary Limited 73 190 000 52,43 73 190 000 52,43
Main Street 460 Proprietary Limited (RF) (held 100% by Main Street 350 Proprietary Limited (RF) which is held 51% and 49% by the Boleng Trust and Assore Limited respectively)* 15 367 000 11,01 15 367 000 11,01
Main Street 904 Proprietary Limited (RF) (held 51% and 49% by the Fricker Road Trust and the Assore Employee Trust respectively)* 16 464 450 11,79 16 464 450 11,79
105 021 450 75,23 105 021 450 75,23
Directors of the company 1 247 085 0,89 1 160 265 0,83
Others – less than 5% 33 338 465 23,88 33 425 285 23,94
139 607 000 100,00 139 607 000 100,00
*Refer “Black economic empowerment status report”.

 

SPECIAL RESOLUTIONS

The following special resolutions were passed on 28 November 2014:

  • The annual remuneration payable to non-executive directors in terms of section 66(9) of the Companies Act for their services as directors were increased, with effect from 1 January 2015, as follows:
    • Deputy Chairman and lead independent non-executive director R450 000
    Non-executive directors (excluding Deputy Chairman) R250 000
    • Members of each of the Audit and Risk Committee, Remuneration Committee or Social and Ethics Committee R100 000
  • The annual remuneration payable to executive directors, in terms of section 66(9) of the Companies Act as amended, for their services as directors was to remain at R60 000 per annum.
  • That the board may authorise the company to directly or indirectly provide financial assistance to any present or future subsidiary or inter- related companies of Assore as contemplated in section 45 of the Companies Act, as amended.

EVENT AFTER THE REPORTING PERIOD

  • On 26 August 2015, the board declared a final dividend of 300 cents per share amounting to R418,8 million, which was paid to shareholders on 21 September 2015.